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Saturday, 21 March 2015

Part IV: Inequality and the Crisis of Capitalism and Democracy

Solutions to the Income Inequality and Declining
Democracy

There is no shortage of possible solutions for rising income
inequality and declining democracy in our time. Nor is there a shortage of
people who dogmatically claim they have “The Answer” as though it is a miracle
cure for bad breath. There is no Shangri
La, (mythical Himalayan utopia) or any kind of utopia except in Plato’s Republic
and Thomas More’s Utopia, any more than there is a possibility for an egalitarian
society because more than likely there will always be elites.

Human beings will probably never achieve the ideal of
equality on this earth as religions conceive of it in spiritual terms. This
does not mean that the struggle for social justice and equality must yield to unchecked
greed, power and privileges by the elites, official and private sector corruption
that is parasitic to the economy, institutional decadence at the expense of
democracy, and tyranny by the few so they retain their privileged status. Solutions
depend on one’s ideological perspective and for the purposes of simplicity I
have divided them into three categories below, though there are many nuances
within these listed.

1)The Neo-liberal Solution:

The
ideological roots of this solution can be traced to Adam Smith at the end of
the 18th century during the nascent phase of the Industrial
Revolution in England. Continue
with the neo-liberal policies and allow the market to determine the social
structure, no matter the level of inequality and damage to the social fabric. Do
not change the political economy regardless of the growing inequality it
creates and how much it undermines democracy because change would only come at
the expense of productivity efficiency, competition, innovation, and
investment.

If preserving the status quo is of the utmost
importance, proposing greater equality and more democracy is to advocate
Socialism, a system that failed in the 29th century in the Soviet
bloc, China and other Communist states. Besides, no matter what the UN, World
Bank and numerous organizations and social scientists contend, inequality
studies are vastly exaggerated and their goal is to undermine the vitality of capitalism.
Inequality is a distraction from the “real issue of freedom”, that is to say,
freedom to maintain the existing social order, to buy political influence through
campaign contributions, to maximize profit and minimize costs, including pay
workers whatever the employer wants not what government legislates in order to
lessen inequality. (James Pierson, The Inequality Hoax)

Income redistribution from the rich to the middle
classes is an anathema to neoliberal apologists of income inequality. However,
they have no problem with the fiscal system as a mechanism for income redistribution
from lower and middle class to the rich and to sustain corporate welfare capitalism.
Apologists of the status quo oppose tax
increases for higher-income groups, while advocating low wages, slashing social
programs, retirement benefits, and social programs ranging from school lunches
to Medicare. The only way to deal with inequality is for each individual to
improve his/her own condition through education/training, not through public
spending for such programs. Besides, there is always philanthropy by
individuals, private organizations, and businesses generous enough to give of
their own free will. (Jamie Peck, Constructions of Neoliberal Reason)

2)The Reformist
or Keynesian Solution:

The
ideological roots of this solution go back to the 19th century
social democratic solutions opposed to monetarist orthodoxy that merely
concentrate wealth and increase inequality. A policy mix of political economy
based on Keynesian economics (1930s New Deal) would be a good start to undo the
damage that neo-liberalism has caused around the world in the last four
decades. Raise income taxes on the wealthy, provide more support for education,
training, and research and development, and offer incentives to business to
hire and offer above minimum wage, and raise the minimum wage law. Close tax
loopholes and crack down on offshore accounts hiding trillions from their
respective governments.

Strengthening the working class is the only way to strengthen the weakening
middle class and this means nationalizing the educational system that reflects
socioeconomic polarization, with the rich going to best schools, and the rest
having to suffer through mediocre ones. The Keynesian school of thought
recognizes that capitalism left to its own devices will self-destruct and take
down with it democracy.The only way to
save democracy and the “market economy” from predatory capitalism is for the
state must interfere to rationalize it and protect the middle class and workers
who are powerless against the financial elites. (Duane Swank, Global Capital,
Political Institutions, and Policy Change in Developed Welfare States;Danny Dorling, Inequality and the 1%)

3)The Socialist Solution: The ideological
roots of Socialism are European, predating Marx and Engels, but gaining
enormous intellectual momentum after the European revolutions of 1848 that
contributed to raising working class consciousness and contributing to
representative democracy throughout the continent. There are varieties of
Socialism and there is fundamental agreement on the goals, though not on the
modalities of what remains largely a utopian solution as far as many people are
concerned. In the absence of systemic change of the political system that would
overhaul everything from fiscal policy to labor, education and health policy,
inequality under democratic regimes will continue to become worse because of
capital concentration.

How likely is systemic change, how does social discontinuity come about,
and even if it takes place does this mean trading one set of existing elites
for another, as was during the French Revolution that ousted the nobility to replace
it with the bourgeoisie. Does democracy in fact work if the state has to force
equality top-down on a segment of the population that simply does not believe
in it and wants to live in a hierarchical society? If democracy is to survive
and be viable, then finance capitalism, which is by nature parasitic –
concentrating and siphoning off wealth instead of creating it and distributing it
more equitably – cannot be the hegemonic force behind the state that drives
policy at all levels. (Jeremy Reiman and Paul Leighton, The Rich Get Richer
and The Poor Get Prison: Ideology, Class, and Criminal Justice)

If “democratic governments” see the root causes of inequality
and poverty in terms of a technical fix for natural and manmade problems, then
the solution is really technocratic than political. Here is what the World Bank
as well as many democratic governments like India regard as causes of extreme
inequality.

1) Natural disasters; drought, flooding, etc.

2) Agricultural cycles and global supply-demand
fluctuations;

3) Environmental degradation and derivative costs;

4)Lack of
technology and the right technology to address problems;

5) Lack of education or more targeted education, then
the solution is to address these problems through technical means.

6) Lack of the proper infrastructure for optimal
resource

7) Lack of or poor strategic economic planning for
sustainable growth

8) Inadequate investment incentives

9) Failure to decentralize production geographically

10) Failure to diversify the economy

11) Failure to achieve social cohesion owing to the
social fabric breaking down and exacerbating socioeconomic inequality

The World Bank, OECD, African Development Bank, Agency
for International Development, UN agencies, and other national and
international organizations see the income inequality problem from the same
technical perspective as neoliberal apologists of the political economy,
proposing technical solutions that only exacerbate the problem for future
generations. I want to emphasize that the problem is not the lack of studies on
income inequality, not the cliché “sustainable development” fits all solution
as though this elements will magically end growing inequality. I walked into
the World Bank bookstore the other day and there were many books dealing with
poverty and inequality, in addition to quarterly pamphlets and online material
the Bank has available. The problem is that neoliberal “reform solutions” are
the cause of income inequality as history has proved from the 1950s to the
present. To have more “neoliberal solutions” from the culprits of inequality
and poverty is absurd.(Catherine
Weaver, Hypocrisy Trap: The World Bank and the Poverty of Reform)

Besides structural problems in the political economy,
without a doubt, wars have always been a cause of widespread misery and poverty
on the losing party, and often on the “winners”, while a few profiteer in the
process. Excessive military spending has brought down civilizations from Athens
in 5th century B.C. to the Roman Empire in 5th century
A.D. and the British Empire in the early 20th century. From the dawn
of civilization when city-states in Mesopotamia and Greece waged war to secure
trade routes, to loot, to gain prestige and glory, while maintaining a
hierarchical social order. In modern history from the Commercial Revolution (16th
century) onwards, wars were waged for market share, raw materials from energy
to strategic minerals, all contributing to the economic and political strength
of the socioeconomic elites.

Even if the goal of war was to benefit the rulers of
the country, the tangible benefits accrued to the socioeconomic elites at the
expense of the broader population. It is simply hollow propaganda that any
modern nation-state under capitalism launches wars for ideological
considerations linked to altruism and not profit for the socioeconomic elites, just
as it is raw propaganda that military spending helps the civilian economy on a
sustainable basis. The end result of chronic excessive defense spending is
greater inequality and decline of the civilian economy. (Paul Kennedy, The
Rise and Fall of the Great Powers; D. Acemoglu, James Robinson, Why Nations Fail: The
Origins of Power, Prosperity, and Poverty)

Defense allocations in 2011 stood at $1.2 trillion.
This was money benefiting mostly defense contractors and consultants, devoted
for parasitic and corrupt enterprises that does not produce new wealth for
society, contributes to income inequality and degradation of democracy because
militarism reorients people toward authoritarian ideological perspective. The
combination of the defense budgets and the corporate welfare capitalist system
are impediments to productivity and a more equitable share of wealth for the
middle and working classes.

Besides defense spending, corporate welfare siphons
off enormous resources and simply transfers income from the bottom income
groups to the top. For example, the US Export-Import Bank provides huge export
subsidies for the largest US corporations. The same holds true for EU subsidies
of European multinationals, although the US and EU have been blaming each other
for subsidies. The EU has often demanded that the World Trade Organization
(WTO) impose punitive fines on the US for granting multi-billion-dollar tax
breaks to Microsoft, General Electric, Boeing, and others that hardly need
subsidies. The corporate welfare system and defense spending are inexorably
linked to the political economy of uneven development and social inequality.
(T. M. Kostigen, The Big Handout: How Government Subsidies and
Corporate Welfare Corrupt the World We Live In and Wreak Havoc on Our Food
Bills)

Philanthropy anti-Poverty Programs

Will global poverty end if the 1000 richest people and
the next one million richest donate all their wealth? Of course not! Charity
has never been the solution to the problem of unequal distribution of wealth
and labor values. Neoliberals argue that philanthropy is the solution to
poverty, while social democrats maintain anti-poverty programs help decrease
inequality and provide needed assistance for the lower strata of society. In a recent
announcement, the world's richest people (a few dozen billionaires) tentatively
agreed to give away to the charities of their choice half of their wealth,
which amounts to $3.5 trillion, or just over one-quarter of the EU's GDP.
Thirty people own 6% of the world's wealth. Meanwhile, 80% of the world's
population share 20% of the world's wealth, making billionaire charity a
godsend gift to the wretched of the earth. About 1000 people on the planet,
according to Forbes, own roughly 10% of the world's GDP, while one billion
people do not have access to drinking water largely because a handful of
multinational corporations, in which the billionaire philanthropists own most
of the stock, own water rights around the world and charge exorbitant utility rates
for water that IMF and World Bank insist must be under private ownership. (Tim
Di Muzio, The 1% and the Rest of Us.)

About two billion people are victims of chronic
malnutrition and lack of medicine, largely because multinational corporations,
in which billionaire philanthropists own most of the stock, do not make it
affordable for people to eat and have medicine. Water, food, health, education and
affordable housing are among the problems that billionaire philanthropists want
to address. The political economy, which made the same philanthropists
billionaires, created the aforementioned problems in the first place. Exploitation
of the public by a handful of fraudulent investors determined to continue
manipulating markets, shield their wealth in tax heavens, so they can amass
greater wealth is indeed a Constitutional right under free speech protection,
as far as neoliberals are concerned.

While charity is fine to meet emergency needs, it
hardly solves the chronic problem of closing the rich-poor gap. Then there are
the governments and international organizations involved in the endeavor of aid
that historical has been used as bait for trade and investment. Although aid is
indeed necessary for emergency cases, aid donors have always used it as bait
for trade and investment and not to solve the rich-poor gap that actually
widens regardless of aid. There are also the programs of the World Bank and
United Nations intended to deal with the poor. These are actually programs
intended to result in commercial benefits for large corporations. For example,
introducing agrichemicals, seeds, and machinery to convert subsistence
agriculture into commercial agriculture does not alter the social structure in
India or Africa. On the contrary, it simply integrates more of the segment that
was on the periphery of the monetary economy into the world system, forces out
the small farmers and results in greater income inequality because of
commercialization of the sector.

Specific country programs to end poverty and close the
rich-poor gap have not worked either. Let us take Lyndon Johnson’s “Great
Society” period of 1964 to 1968 also known as the “War on Poverty”. That
program essentially locked in a segment of the population, mostly minorities,
into chronic lower working class to poverty status rather than providing
opportunities for upward social mobility. Not that the ghettos in London and
Paris as a result of similar programs are much better than those of Chicago and
Los Angeles.As much in the US as in UK
and France, not only has the rich-poor gap widened since the Thatcher-Reagan
decade, but the rich-middle class has also widened since government programs
were introduced to close the poverty gap in the 1960s.

The key reason
for the welfare experiment failure was government policy intended to maintain
the social structure intact and continue with policies that strengthen the rich
even more, while providing a social safety net for the rest of the population
so that they would continue to support what was presented as “democratic”
society. In short, the anti-poverty policies were in fact a means to preserve
the system that causes poverty and widens the gap between the rich and the rest
of the population. These pretences were dropped first by US and UK in the 1980s
when neoliberal policies triumphed and then around the world because welfare
corporate capitalism began to replace the social welfare state.

In existence for
about five hundred years, the evolving capitalist economic system in different
forms causes social and geographical poverty and inequality on a global scale.
As the core of the capitalist world-economy shifts from the US to East Asia in
the course of the 21st century, there will be increased socioeconomic
ineqaulity in the West and relative rising affluence in underdeveloped
countries. The irony of mostly Western billionaires donating in large measure
to non-Western areas is that in the 21st century the West will most definitely
experience the same Third World conditions. Nor is the solution "made in
America" (Germany, France, UK, etc.) because at the core of cyclical
crises of capitalism is not to make each country more competitive--lower wages
and higher quality products--as the apologists of the system insist and Obama
argued recently. At the core of the system rests the assumption that capital
chases the highest profits wherever it can secure them with the help of the state.
Inequality is as much a local and national problem as it is a global one. (Michael Chossudovsky, The Globalization of Poverty and the New World
Order)

Socioeconomic
inequality and poverty is caused and can only be solved by political economy
not by charity, a handful of wealthy people who steal legally and illegally for
decades and then decide to give some of their wealth to atone for their greed,
or expedient diplomacy by a government(s) wishing to promote trade with the aid
recipient. Inequality and poverty cannot be eradicated by private organizations
with the support of the UN and World Bank whose goal is the more thorough
commercial exploitation of natural resources, labor and markets where poor people
live. If indeed inequality and poverty are imbedded in the structure of the
political economy, the only solution is structural.

Band aid solutions for Inequality

Most of the programs introduced to combat extreme
inequality and to sustain democracy have been band-aid solutions. The proof of
failure rests is in the inequality statistics. More for public relations
purposes to show the world that there is a commitment to democracy and social justice,
band-aid economic solutions have always had the goal of preserving the
political, economic, and social status quo. We continue to see such band-aid
solutions until the present. Greece is the latest example because it has
captured world headlines in the last five years owing to its inability to
service the public debt and the reality of its technical bankruptcy causing
ripple effects in the euro zone. Austerity policies combined with neoliberal
ones de-capitalized Greece, as capital transferred out by the billions from
both the public and private sectors from 2010 until the present.

Once the credit dries up and domestic and foreign capital
have fled, IMF loan conditionality entails securing new loans to finance
servicing existing debt. The result for Greece has been GDP reduction to the
tune of 25% annually or $70 billion annually from 2010 to the present for a
total of $350 billion. This resulted in gross uneven income distribution and
social inequality, not just for this generation but for the next one as well.
On 19 March 2015, the instruments of austerity and neo-liberalism came along
and offered $2 billion euro for the “humanitarian crisis” that austerity and
neo-liberal policies created in the first place.

In making the announcement for the humanitarian aid
that amounts to 1.2% of Greece’s annual GDP, EU Commission President
Jean-Claude Juncker stated that the money will actually go to help some of the
hard-hit companies and targeted groups. First, monetarist and neoliberal
policies causes the banking crisis, second the middle class and workers are
asked to pay for it, third comes another dose of austerity, and finally, adding
salt to injury come the band-aid solution for the poverty holocaust to
demonstrate that there are systemic mechanisms to address worst case inequality
scenarios.

The global rising
inequality has been responsible for sociopolitical instability from Nigeria and
Yemen where radical Islamist groups are engaged in guerrilla war to the Middle
East and Philippines. Rise in income inequality will continue to have social
and political implications and cause instability and further weaken the world political
climate and economy as the UN has warned to the shrugs of the richest nations
responsible for the crisis of capitalism. There have been calls by both
governments and non-profit organizations that poverty will inevitably rise
rather than drop. From the inner cities of the US to sub-Sahara Africa, inequality
is rising amid governments' sole focus on the health of the market controlled by
those at the top of the socioeconomic ladder.

To circumvent the criticism that they are violating
the social contract of public accountability, democratic governments have been
using the strategy of co-optation and piecemeal approach to social justice. To
divert attention from the systemic inequality, governments have embraced social
and cultural issues, while categorically rejecting the inequality issue as core
to the political economy. The cultural and social issues include using the
issues of racism, sexism, gay bias, environmental degradation, ethnic and
religious hatred. Committed to providing women, minorities, gay people, and
environmentalists with “equality of opportunity” access, the institutional
structure has made these part of the political correctness arena, thus
silencing critics about inequality in society.

As long as a small percentage of non-whites, women, gay
people, people of all faiths and environmentalists have a stake in capitalism,
then why does the larger issue of inequality need to be addressed? If Obama can
become US president, how can there possibly be a problem of inequality, racism
and social justice in America? OK, so there are the intermittent shootings of
block youth, the reality of blacks as the majority populating prisons,
suffering higher unemployment and lower income as a whole. But at least there
is equality of opportunity! If a Muslim Arab can be a European bank executive,
how there be systematic discrimination at the workplace against Muslim workers
and vast income inequality in every country from Greece to the UK? In other
words, class transcends religion, race, ethnicity, gender, etc, so there is no
need to focus on inequality of the entire society. As long as a democratic
society demonstrates tolerance for gay people, minorities, women, and even
those Green Peace environmentalists causing trouble for Shell Oil, well then
what else can a democracy do?

While gender, ethnic, racial and religious prejudice
and discrimination are integral parts of social inequality, breaking them apart
from the class structure category is an attempt to de-legitimize the more universal
issue of systemic inequality and break the solidarity of all oppressed groups
by vying them against each other. Women’s issues are only about women as though
the millionaire woman in Manhattan is in the same category as the cleaning
woman in Detroit; as though the African-American insurance executive is in the
same category as the unemployed teen in Manila; as though the Hispanic female
owner of her own bottling franchise company is in the same category as her
white maid.

These are very old distractions of bourgeois
politicians and apologists of the political economy. However, they became
pronounced after the Civil Rights and women’s movement of the 1960s and
co-optation has worked well in the last half century. If progress had been made
on these issue of minority rights one could argue that perhaps it was well
worth it. But the record speaks for itself on the socioeconomic status of the
vast majority of minorities.

Social Discontinuity

Social discontinuity is not around the corner as some
would like to believe any more than revolution that would overthrow capitalism.
Even when it is unfolding with society showing strains in all institutions, the
vast majority of the population will not notice that anything unusual is taking
place. When social discontinuity was unfolding during the transition from the
Fall of Rome to the Medieval World, from the feudal-manorial mode of production
to commercial agriculture and long-distance trade people simply went about
their lives as though society was “normal”. The transition from the capitalist
world economy to a new mode of production will evolve gradually and over the
course of many decades if not centuries.

Social discontinuity on a world scale will not come as
a result of a single national uprising, a spectacular revolutionary uprising,
and it will not come because reform movements that attempt to rationalize
capitalist democracy have failed. The entire world system would have to
collapse from the core outward to the periphery for social discontinuity to
take place. Because of the system’s interdependence and close integration as a
global one, it will collapse altogether, rather than national capitalism
falling in one country while another thrives under the market economy. The
glaring absence of social justice, the wide gap between rich and poor will
invariably precipitate political instability as we have seen in the last fifty
years. Besides internal conflict and political instability, capitalism in its
pursuit of more markets will mean more regional conflicts, more instability and
greater tensions between countries.

If there is a rise in inequality and less social
justice despite the promise of democracy, why then does capitalism survive and
thrive not just in authoritarian societies but in open ones where pluralism
exists? Mechanisms of social control part of which is indoctrination and
distraction are among the answers and explain in part why social discontinuity
will take a long time to evolve. Clearly, religion redirecting peoples’ focus
from the material world to the spiritual has always been the most powerful and
enduring mechanism of social conformity. However, in modern society secular
ideology along with religion is the basis for mass indoctrination as expressed
endlessly not just through the mainstream media, but all institutions from
educational to social clubs.

Focusing on foreign conflicts, potential enemies, and
domestic violence against societal harmony are among the ways of the state
engendering conformity. As long as there are larger enemies and the culture of
fear thrives, people become convinced that the inequality and lack of social
justice may not be as significant. Therefore, nationalism as a secular religion
and at the core of the hegemonic culture has always helped to keep people
docile and resist calls of critics for social progress.

Clearly, one would have to blind not to
see that in the last five centuries capitalism has perpetuated the hegemony of
the privileged elites enjoying dominant influence in every sector of society,
from the political arena to the judicial system to at the expense of the rest
of society. Capitalism has at its core the value system of greed feeds on the
base human proclivities. This is learned behavior, conditioned by the hegemonic
culture that keeps capitalism alive. We learn to worship the culture of
materialism, to believe there is nothing else more important in life than
devoting one’s life to working and shopping and to self-aggrandizement and
atomism at the expense of the community. In paying tribute to his fellow human
beings that work and create, that helped to shape his character and life,
Albert Einstein was correct that we are indeed social animals, as Aristotle had
observed centuries ago, as everyone of us recognizes stepping outside our home,
no matter what the dominant culture teaches and how alienating the new
technology is trying to make human beings.

As social animals, we are part of a
collective totality. We are not sitting on some mountaintop all alone hunting
and gathering in the manner of our ancestors 15,000 years ago. We have a social
responsibility and that cannot be anything short of a collective response
through policy to change the injustice of society. In the age of no places left to exploit in the same
manner as in 19th century Africa, capitalism has turned inward
focusing as much on exploiting labor in the core regions of the West as in the
periphery of Asia, Latin America and Africa. Frank Fanon’s Wretched of the Earth dealing
with French colonial rule in Algeria and the broader issue of Western colonial
and neo-colonial exploitation of non-Western countries continues to have
relevance in the early 21st century as the world has become
socioeconomically and geographically polarized although we are no longer living
in the age of colonization. As difficult and as radical as Fanon’s solution may
sound about grassroots action, the concept of “redemptive violence” may not be
as far off as we believe to correct the injustices of social, political, and
economic inequality.

With the inevitability of periodic short recessionary
cycles, and perhaps one or more very deep and long recessions in the 21st
century, how likely is it that the economic and political structure will be
able to be sustainable and the road to social discontinuity averted? If the
state were to withdraw its massive support from the private sector the
capitalist system would begin to collapse and we would be well on our way
toward social discontinuity.

Social
discontinuity will eventually take place, just as it did when the
feudal/material system gave way to capitalism. While we are not near the
collapse of capitalism and democracy in the early 21st century, I
would not be as confident if the transition of social discontinuity accelerates
toward the end of the century. The revolutions of the 20th century
that took place in underdeveloped and dependent countries exploited by the West
and/or Japan – Russia, China, Vietnam, and Cuba – were social but also national
expressions against foreign exploitation and assertions of national sovereignty
and determining their future without foreign hegemony. All of them had weak
state structures with a weak national bourgeoisie and a strong foreign capital,
military and political influence. In short, the social revolutions were
combined with nationalism as catalyst for popular mobilization that transcended
class.

As the developed
countries – G-7 – are becoming increasingly socioeconomically polarized, and
“Third World” phenomena manifest themselves in the “First World”, the signs of
social discontinuity are present as much in the US and UK as they are in
developing nations. For those in the bottom of the socioeconomic scale in
advanced capitalist countries, health, education, housing, the criminal justice
system, and quality of life in general is not much different than it is for
those in countries trying to develop their economies. Not just the polarization
widening, but the state becoming increasingly authoritarian and institutions
increasingly marginalizing the masses will create the new dynamics for social
discontinuity.

"A
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political and religious intrigue, this novel entices the reader’s
senses and intellect beyond conventions. Slaves to Gods and Demons
takes the reader through a roller coaster enthralling journey of
personal trials and triumphs of a family emerging vanquished and
destitute after World War II.

Narrated by a young boy, Morfeos, modeled after the Greco-Roman pagan
deity of sleep and dreams, the book reveals the soul of a people trying
to ascertain and assert their identity while rebuilding their lives and
recapturing the glory of a lost civilization.

Seeking liberation from restraints of time, social conventions, and
binding traditions, the deity of dreams provides the conformist and the
free-spirited characters in the novel with venues for redemption that
are mere paths toward illusions. Exploring the complexities of human
relationships shaped by priest and politician alike, the novel rests on
the central theme that life is invariably a series of illusions, some
of which are euphoric, most horrifying, all an integral part of daily
existence.

Striving for purpose amid life’s absurdities after the destruction of
western civilization in two global wars, the characters in Slaves to
Gods and Demons struggle between holding on to the glory and grandeur of
a pagan legacy and the Christian present shaped by contemporary
secular events in Western Civilization."